11th Circuit Dismisses Christian Coalition's Suit On Non-Profit Tax Status

In Christian Coalition of Florida, Inc. v. United States, (11th Cir., Nov. 15, 2011), the 11th Circuit held that a tax refund suit needed to be dismissed as moot after the IRS refunded the disputed taxes in full. Christian Coalition of Florida ("CC-FL") sought IRS recognition as as Section 501(c)(4) social welfare organization. However IRS refused the application, concluding that CC-FL's activities primarily constitute participation in political campaigns-- an activity not permitted for 501(c)(4) organizations.  CC-FL paid the small amount of taxes due and then claimed a refund.  IRS refunded a portion of the taxes. CC-FL sued for a refund as to the remainder ($261) and also sought declaratory and injunctive relief in order to challenge the IRS determination that it was not entitled to 501(c)(4) status. Shortly after the litigation was filed, IRS refunded the remaining taxes.  The court agreed with the government that the Anti-Injunction Act and the tax exception to the Declaratory Judgment Act preclude CC-FL from suing to obtain favorable tax status for future years. A special tax code provision (26 USC 7428) allows groups claiming Section 501(c)(3) status to obtain declaratory judgments, but the provision does not apply to 501(c)(4) organizations which do not face the same problem of losing donations when their deductibility is open to question.  Contributions to 501(c)(4) groups generally are not deductible in any event.